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Metro Brands lists at 13% discount. What should investors do now?

Most analysts had assigned a 'subscribe' rating to the Metro Brands IPO given its strong financials and cash flow generation, along with plans for aggressive product portfolio expansion and store addition

December 22, 2021 / 03:43 PM IST
Metro Brands IPO

Metro Brands IPO


Despite a healthy response to its public issue, Rakesh Jhunjhunwala-backed Metro Brands saw a weak debut on December 22, listing at a discount of 12.8 percent at Rs 436 to the issue price of Rs 500 per share.


It was the third weak debut in December after Rategain Travel Technologies and Shriram Properties, largely due to a tepid market sentiment over the past few days.


The maiden public issue of the speciality footwear company was subscribed 3.64 times on December 10-14, with the maximum demand from qualified institutional buyers, who subscribed 8.49 times their reserved portion. Non-institutional investors bid for 3.02 times the allotted quota, while the retail portion was booked 1.13 times.


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Most analysts had assigned a ‘subscribe’ rating to the Metro Brands IPO for its strong financials and cash flow generation, along with plans for aggressive product portfolio expansion and store addition.

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At 12:33pm, the stock was trading at Rs 487, higher than the price at open, but lower than its issue price of Rs 500.


So, should investors hold on or exit the stock? Here’s what analysts are saying:


Amarjeet Maurya, A.V.P, Mid Caps, Angel One

On the listing day, Metro Brands' stock fell ~6% mainly due to the company trading at higher valuation (TTM PE -86x) and fear of the new Covid variant omicron (will increase the possibility of lockdown). However, we are positive on the stock for the long term on the back of its asset light business, strong brands and a wide range of products. We believe every dip in its share price provides buying opportunities to long term investors.

Likhita Chepa, Senior Research Analyst, CapitalVia Global Research


Metro Brands seems to have been affected by the ongoing volatility and sentiment in the market. Its shares were trading at a slight discount in the grey market as well. It looks like the sentiment in the IPO market is changing now where we see meaningful listing gains only in select stocks with efficient business models, strong balance sheets, and healthy prospects.


Short-term investors can consider holding Metro Brands for a few more weeks, and book profit at 15-20 percent. Although its valuations are slightly on the higher side, considering its financial performance, its asset-light business model and consistent dividend payout mechanism, we recommend investors to hold the stock for medium to long term.


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Mohit Nigam, Head - PMS, Hem Securities

Currently, Metro Brands has 598 stores in 136 cities spread across India, and plans to utilise the proceeds from the fresh issue towards expenditure to open new stores under the Metro, Mochi, Walkway and Crocs brands and for general corporate purposes.

According to our analysis, long-term investors should hold this stock for and new investors can accumulate at Rs 400-430 as the company is well placed to benefit from positive industry growth trends given its strong presence, a wide range of brands and products, which cater to all occasions across age groups and market segments. Metro Brands is among the aspirational Indian brands in footwear category, which majorly caters to the economic to premium category of footwear.

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Santosh Meena, Head of Research, Swastika Investmart


With an asset-light model, Metro Brands derives most of its revenues from third parties. It has demonstrated decent growth, profitability and financials in the past.


Long-term investors are advised to hold the stock, while short-term investors can keep their stop loss at Rs 380. If the price holds above Rs 380 on a closing basis, fresh positions can be taken and bought on dips.


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Sonam Srivastava, Founder, Wright Research


Metro Brands listed at a discount of 13 percent, which was indicated by the grey market premium. But the price has seen some recovery. However, the IPO had a very high OFS component, with only Rs 250 crore of the Rs 1,335 crore to be reinvested in the company, which makes investors sceptical.


Looking at the business, Metro Brands is an excellent profitable, growing, and asset-light company with a strong promoter background and an experienced management team. In addition, it is a well-known brand and could give investors excellent exposure to the consumer discretionary sector of luxury footwear. On the other hand, if Omicron wreaks havoc, the market for consumer discretionary products will take a hit in the short term. But for the long term, this looks like a good buy.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.



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first published: Dec 22, 2021 12:47 pm
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